Top Rice Exporter Sees Crop at Two-Decade Low on Water Shortage

Rice production in Thailand may plunge to the lowest level in 19 years as dry weather may prompt the world’s largest shipper to further restrict plantings to preserve water supply.

Output of rough rice may decline to as low as 22.98 million metric tons in 2015-16, the least since 1996-97, assuming there is no planting during the dry season starting in November, Thailand’s Office of Agricultural Economics said in an e-mailed reply to Bloomberg questions on Tuesday. That’s down 30 percent from 32.62 million tons a year earlier.

A smaller crop from the Southeast Asian nation, which accounts for about a quarter of the global trade, may tighten supply just as El Nino threatens to parch fields in Asia and disrupt harvests worldwide. Global production will fall for the first time since 2009-10 as flooding and drought in major growers damage crops, while consumption expands for a sixth year, the U.S. Department of Agriculture estimates. Futures in Chicago have risen 10 percent this year, reaching a one-year high on Sept. 14.

“A potential fall in output could gradually boost prices by up to $20 a ton by the end of this year,” said Kiattisak Kanlayasirivat, a Bangkok-based director at Ascend Commodities SA, referring to export prices of 5-percent broken white rice, an Asian benchmark. Domestic prices may climb to 9,000 to 10,000 baht ($278) a ton from around 8,000 now, he said.

Production may total 24.69 million tons if 20 percent of rice is planted in the dry season, according to the Thai office. Annual output averaged 36.39 million tons in the past five years, it said.

Water Supply

Farmers won’t be allowed to plant crop from Nov. 1 to April 30 as lower-than-average rainfall causes insufficient water supply, Farm Minister Chatchai Sarikulya told reporters on Sept. 11. Cabinet is yet to make an official announcement on prohibiting plantings.

Growers need to reduce plantings or switch to other crops that consume less water as rainfall this year is about 25 percent below a historical average, resulting in declining water reserves, Sansern Kaewkamnerd, a government spokesman, told reporters Wednesday. State agencies are working on measures to support farmers, he added.

World rice production for 2015-16 is forecast at 475.76 million tons, down from 478.65 million projected in August, the USDA said in a report last week. Consumption was estimated at 487.42 million tons for the same year.

Futures on the Chicago Board of Trade traded at $12.920 per 100 pounds at 4:52 p.m. in Bangkok. Prices rose to $13.080 this week, the highest since July 2014.